Consumer Spending To Help France Resist Global Slowdown: Central Bank

The French economy will grow marginally slower this year than previously expected although improving household purchasing power should help limit the impact of a global slowdown, the country's central bank said on Thursday.

The Bank of France forecast growth of 1.4% this year in its quarterly economic outlook, marginally less than the 1.5% it predicted in December. The economy grew 1.5% in 2018.

At the rate forecast by the central bank, France will easily outperform its more export-dependent neighbour Germany, where the government and private institutes expect growth of 1% or lower due to weak foreign demand.

Since growth in France is more dependent on consumers at home, its economy should benefit from a €10 billion ($11.3 billion) package of concessions to protestors aimed at boosting spending power and quelling a wave of violent demonstrations.

Wage Increase

In December, President Emmanuel Macron announced wage increases for the poorest workers and a tax cut for most pensioners in an effort to stifle anti-government protests that saw some of the worst street violence in decades in Paris.

The central bank estimated the measures would boost households' purchasing power this year by 0.7 percentage points, and in turn lift consumer spending by 0.3 percentage points.

Households would likely squirrel away the rest of the income gains, pushing the savings rate to 15.4% this year before easing lower afterwards.

Low inflation, seen at 1.3% this year before gradually rising to 1.7% by 2021, would also favour households' income gains.

Meanwhile, job creation was seen slowing although stronger productivity would lead to higher wages, the central bank estimated.

Looking further out, French economic growth was seen rising marginally to 1.5% in 2020, before easing back to 1.4% in 2021.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.